These three lenders are seeing the most home loan arrears
Non-bank lenders Victorian Mortgage Group, Pepper Money and Bluestone have some of the most delinquent mortgage books in Australia, with arrears over or near 5 per cent as rate rises exert further pressure on households.
The increase in delinquencies towards the middle of the year plays against trend, with arrears typically at their highest in January and February after the heavy spending Christmas period. This, according to VMG boss Bernie McIntosh, was due to how quickly interest rates had risen in the past year.
Some borrowers will be trapped in zombie loans because they can no longer afford to make repayments. Louise Kennerley
“This year is different,” Mr McIntosh said. “When people talk about a lag between the rate rises and when it bites, they mean that people are committed to certain levels of expenditure.
“You might book a holiday 12 months in advance, but if the interest rate rises on the way there, you are still locked into those costs.”
While borrowers typically work through any shortfalls on their repayments by April and May in prior years, arrears in VMG’s owner-occupier residential mortgage-backed securities – bundles of mortgages sold to investors, paying out interest accrued – grew from 4 per cent in January to 7 per cent in May.
It represents the quickest increase in delinquencies for VMG since at least the middle of 2021. Mr McIntosh said it would get worse as recent interest rate hikes bite and more appear on the horizon.
“It is going to take time for people to work through those issues, or absorb the rate rises with the lag process,” he said, “We are expecting another two rate rises, and borrowers haven’t felt the impact of the last two rises yet.”
The data indicates the growing stress on borrowers
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